A growing number of consumers are exploring unconventional pathways to homeownership, including buying a home with a friend, family member, or partner, according to the National Association of REALTORS®’ 2021 Home Buyers and Sellers Generational Trends Report.
With rising costs, home buyers may find pooling their money together can put homeownership more within reach.
“This strategy can help ease the financial burden of purchasing a home to some degree,” says Glenn Brunker, president of Ally Home. “But buyers should be prepared to navigate the potential risks.”
Brunker recommends that those considering purchasing a home with friends, family members, or partners keep some points in mind:
- Finalize and stick to a budget. Buyers should set their budget prior to starting their home search. The budget should include not just how much home they can afford but also how they will manage the additional expenses of homeownership, like closing costs, taxes, lawyer fees, utilities, maintenance, and more. Consider how a lower budget may offer the chance to save more or even handle the mortgage payment on your own. “Ideally, the division of these costs should be put in writing to avoid any future conflicts as a result of planned or even unexpected costs,” Brunker adds.
- Establish how the property will be titled. A legal professional can also help both parties determine how they will title the property, Brunker says. For example, four friends may be purchasing a home together, but one makes the majority of the down payment. These buyers might structure a tenancy in common agreement so one party owns 40% of the home and the other three each own 20%.
- Consult with a legal professional. Along with a lender and real estate professional, buyers should meet with a title agent or real estate attorney to ensure all buyers understand the legal options available and implications of the agreement, Brunker says. “This professional can help answer important but often overlooked questions like, what is the exit plan if one party wants to move? What are the rights of survivorship?” Brunker says.
Source: Ally Home